Medical factoring helps local practice grow
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Medical Factoring

Medical factoring is available to healthcare businesses that bill Medicare, Medicaid and insurance companies for services rendered. Medical funding is done by specialized factoring companies that have a deep understanding of medical billing. Companies that are in the medical field, but, are paid by commercial concerns such as hospitals, nursing homes, etc. do not need to work with a specialized medical factoring company.

Like other types of factoring, medical funding companies determine an advance rate based on the anticipated percentage of collections or dilution rate. Dilution simply means the amount billed to customers less the amount actually collected. In order for healthcare businesses to receive the amount owed they must ensure that claim forms are properly submitted and received by insurance companies which medical funding companies can assist with.

Because of the labor and specialization that goes into ensuring medical invoices are submitted properly, medical factoring companies tend to charge a higher rate than traditional funding companies. Rates for medical funding tend to be in the 2% - 4% ranger per month, however, can be less for volume commitments. Healthcare businesses that do not require working capital, however, need assistance with billing and collections will use the services of a medical billing company which can also help accelerate cash flow as invoices tended to be paid quicker.

A more sophisticated medical funding program is available for mature healthcare companies that require cash flow and have good invoicing and collections practices. Funders will provide an accounts receivable based line of credit which focuses more on bulk invoicing and collections than funding individual invoices. There is less verification done on the individual invoices, however, the company will typically have to meet certain loan covenants including a healthy debt service ratio.

While medical factoring is more expensive than traditional factoring, the back office support that comes along with the financing is sometimes worth the additional cost. Healthcare facilities that need cash flow as well as back office support can benefit greatly from medical funding.

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Clinic uses medical factoring to grow

Women's Clinic

$500,000 Medical Factoring

Medical funding helps local clinic

Family Clinic

$750,000 Medical Factoring